There are 100 shares outstanding of a company and Net Income is $10,000 and is paid...

There are 100 shares outstanding of a company and Net Income is $10,000 and is paid out to shareholder as dividend without retaining earning so the dividend per share is $100. Assuming a 10 percent required return, the value of a share of stock today.

Expert Solution

We know, value of a share = Dividend paid / Ke -g

where g is the growth rate.

g = Retention ration * Return on equity

Since, the retention is zero, so g becomes zero

Value of share = 100 / )/0.10 - 0

= 100 / 0.10

= 1,000

So, value of stock = $1,000

jeff jeffy answered 2 years ago

Company ABC has 10,000 shares outstanding and the stock price is $100. The company is expected...

Company ABC has 10,000 shares outstanding and the stock price is $100. The company is expected to pay a dividend of $10 per share next year and thereafter the dividend is expected to grow indefinitely by 6% a year. The company now makes an announcement: It will repurchase shares next year instead of issuing cash dividends. But from year 2 on the payout policy stays the same. (8 points) a. What is the expected rate of return on the stock?...

Blossom Inc. presented the following data: Net income $5,500,000 Preferred shares: 48,000 shares outstanding, $100 par,...

Blossom Inc. presented the following data: Net income $5,500,000 Preferred shares: 48,000 shares outstanding, $100 par, 7% cumulative, not convertible $4,800,000 Common shares: Shares outstanding, Jan. 1, 2020 639,000 Issued for cash, May 1, 2020 99,000 Acquired treasury shares for cash, Sept. 1, 2020 (shares cancelled) 138,000 2–for–1 stock split, Oct. 1, 2020 As of January 1, 2020, there were no dividends in arrears. On December 31, 2020, Blossom declared and paid the preferred dividend for 2020. 1) Calculate earnings...

The net income of Novis Corporation is $84,000. The company has 25,000 outstanding shares and a...

The net income of Novis Corporation is $84,000. The company has 25,000 outstanding shares and a 100 percent payout policy. The expected value of the firm one year from now is $1,750,000. The appropriate discount rate for the company is 12 percent, and the dividend tax rate is zero. a. What is the current value of the firm assuming the current dividend has not yet been paid? (Do not round intermediate calculations and round your answer to 2 decimal...

Gator, Inc. had net income of $1,650,000 and 500,000 common shares outstanding in 2018. The company...

Gator, Inc. had net income of $1,650,000 and 500,000 common shares outstanding in 2018. The company paid $30,000 in common stock dividends during the year. The company has 200 convertible bonds outstanding that have a coupon rate of 8% and a par value of $1,000 per bond. Each bond can be converted into 150 common shares. The company's tax rate is 30%. What was the company's diluted earnings per share (EPS) in 2018? a. $3.078 b. $3.134 c. $3.217 d....

Whispering Inc. presented the following data. Net income $2,550,000 Preferred stock: 51,000 shares outstanding, $100 par,...

Whispering Inc. presented the following data. Net income $2,550,000 Preferred stock: 51,000 shares outstanding, $100 par, 8% cumulative, not convertible 5,100,000 Common stock: Shares outstanding 1/1 816,000 Issued for cash, 5/1 318,000 Acquired treasury stock for cash, 8/1 162,000 2-for-1 stock split, 10/1 Compute earnings per share. (Round answer to 2 decimal places, e.g. $2.55.) Earnings per share $enter earnings per share rounded to 2 decimal places

Sunland Inc. presented the following data. Net income $2,680,000 Preferred stock: 48,000 shares outstanding, $100 par,...

Sunland Inc. presented the following data. Net income $2,680,000 Preferred stock: 48,000 shares outstanding, $100 par, 8% cumulative, not convertible 4,800,000 Common stock: Shares outstanding 1/1 729,600 Issued for cash, 5/1 273,600 Acquired treasury stock for cash, 8/1 160,800 2-for-1 stock split, 10/1 Compute earnings per share. (Round answer to 2 decimal places, e.g. $2.55.) Earnings per share $enter earnings per share rounded to 2 decimal places

Net income $2,350,000, Preferred stock: 52,000 shares outstanding, $100 par, 9% cumulative, not convertible 5,200,000 Common...

Net income $2,350,000, Preferred stock: 52,000 shares outstanding, $100 par, 9% cumulative, not convertible 5,200,000 Common stock: Shares outstanding 1/1 686,400 Issued for cash, 5/1 270,000 Acquired treasury stock for cash, 8/1 148,800 2-for-1 stock split, 10/1 Compute earnings per share:

Nottebart Corporation has outstanding 10,000 shares of $100 par value, 6% preferred stock and 60,000 shares...

Nottebart Corporation has outstanding 10,000 shares of $100 par value, 6% preferred stock and 60,000 shares of $10 par value common stock. The preferred stock was issued in January 2017, and no dividends were declared in 2017 or 2018. In 2019, Nottebart declares a cash dividend of $300,000. How will the dividend be shared by common and preferred stockholders if the preferred is (a) noncumulative and (b) cumulative?

Today the company announces net income equals $51 million. They have 20 million shares outstanding, and...

Today the company announces net income equals $51 million. They have 20 million shares outstanding, and today’s share price is $94.86 . Find the company’s price-to-earnings ratio. {ANSWER: D ; xlADDRESS: FA1!$B$227 } /\a. 40.9 b. 30.7 c. 33.8 d. 37.2 e. 45.0

A company has net income of $910,000; its weighted-average common shares outstanding are 182,000. Its dividend...

A company has net income of $910,000; its weighted-average common shares outstanding are 182,000. Its dividend per share is $0.55, its market price per share is $90, and its book value per share is $79.00. Its price-earnings ratio equals: 15.80. 18.00. 11.00. 11.55. 10.45.

Question